The Teachers Retirement System of Georgia (TRS) surprised many during the 2017 legislative session by requesting an additional $223.9 million in annual funding, then did so again in 2018, requiring an additional $364.9 million in contributions. The nearly $600 million in annual increases to teacher pension funding have been necessary in large part because of growing unfunded liabilities – colloquially known as pension debt – which were reported at $23.6 billion in 2016. Since then the debt has grown to $24.8 billion, but in contrast with previous years TRS requested a relatively smaller annual increase of just $25 million for 2019. Does that mean TRS is experiencing “improving financial strength,” as a teachers association leader recently told The Atlanta Journal-Constitution?[1]

Unfortunately, the answer is no. The increases in annual contributions may have slowed down this year, but the growth in costs is still continuing. The fiscal challenges facing TRS run deeper than just the dollar amount of its pension debt.

This policy brief will summarize some of the primary causes of Georgia’s $24.8 billion[2] in unfunded teacher pension liabilities (see Figure 1) and highlight key indicators that further contribution rate increases are likely in coming years without a meaningful change to the status quo.

[2] In fiscal year 2017 the unfunded pension liability of Georgia TRS amounted to $24.77 billion on actuarial basis and $18.59 billion on market value basis (as reported under the new GASB 67/68 standards).

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2 thoughts on “Georgia’s Teachers Retirement System”

Thank you for your articles related to the unfunded and in a way, unknown cost of the teacher retirement system liability. Truth be told the unfunded costs for all state, county, and municipal employees is staggering. By self disclosure, I am a teacher who retired this year with twenty years of service. Though I wanted to continue my career in the classroom, it no longer made financial sense from a retirement perspective. I began teaching twenty years ago. I turned sixty-one in February of 2018. In January my financial planner ran some numbers of how much difference my retirement would be if I continued to teach until I turned 65 years of age. If I remained in my present job as classroom teacher, the difference between leaving in 2018 and 2023 was $100 a month more. The only option I had to increase this amount is to increase my annual salary.

I am not one of those who thinks that I am substantially underpaid for what I do. By comparison to police officers, military service, and social workers, I have not regrets about leaving one career to become an educator. I knew what the pay was when I started, the demands of the job, and what was expected of me. And, when you compare the median salary in Georgia ($53,000) to the starting pay of a teacher in Georgia (@ $37,000), you have to take in consideration the number of days teachers are contracted for to get a picture of our compensation less benefits. Teachers in Georgia are contracted to work 190 days whereas the average worker in Georgia works 260 days. Yes, I know some teacher do other stuff during the summer. I taught summer school and earned my Doctorate during the summer. I get that. But, that presupposes other professionals don’t have to earn additional credits to maintain their license or move ahead in the field. Based on the average number of days teachers are contracted they earn $194 per day whereas the median salaried worker in Georgia earns $203 per day; not a substantial difference.

While the difference in per day salary is not great, the difference in the ability to earn more is. This is where the retirement system goes awry. The teacher retirement system (TRS) is calculated based upon your two greatest years of highest salary. For those not familiar with teacher salaries, they rarely increase though the state has made great strides in teacher pay. Keep in mind the local system contributes to the salary as well. In addition, after a period of a certain amount of years, teachers are not eligible for what is known as step increases; higher income for years of service and education. This is the situation I found myself. The lack of income mobility. For me to increase my retirement I would have to change jobs and become an administrator. Administrators earn more pay (most of them deserve it) but they work more days. I could have taken an administrative position, but I would work more days and more hours in effect reducing my average daily pay from that of a teacher. My new income would pump up my retirement benefit, but would cost more in the short term. Plus, I am a teacher. If I wanted to push paper, I would become a postal employee. No offense intended to postal employees, but I like students and teaching. So, at least for me, that was not a viable option.

Your article indicated the complexity of the problem and the dire consequences if not addressed. You simply need to go the state of Illinois as evidence to what happens when the bill comes due. I might suggest an area that you did not mention. The problem is the amount of income flowing out is quickly moving towards being greater than the amount being contributed. A two tiered retirement system would help resolve some of the problem. Teachers should be allowed to invest through the state in private IRA accounts. The state would not have to contribute to these accounts, but would make them available as an option in place of the TRS system. When I retired, I took part of my retirement in a monthly check and the remainder transferred to a private IRA. It was an easy decision. My private IRA which is very conservative has already outperformed my gain in the TRS. The TRS is very well managed and I was happy to contribute; they are just super conservative and though they match the contribution, the opportunity for the state legislature to make changes was a concern.

Finally the issue is income mobility; understanding that the state has 159 counties and school systems with varying pay scales. Here is a suggestion. The state can give teachers a reduced state tax liability for every year they teach. For example, for every five years of service, the state reduces the employees tax by a percentage until eventually their pension and retirement is state tax free when they retire. This simple change in tax law will encourage longevity, increase net income for teachers, and ameliorate the dilemma that I faced wanting to remain in the classroom, but having no financial reason to stay.

What is clear we have a problem that needs solving. To my former colleagues who will get offended by the reference to our contracted salary and comparison to other fields – even those with similar educational requirements – I agree that we are unique in that economic growth and stability are dependent upon how well we do our jobs. You can always fire your accountant and find another. You can’t always find an experienced teacher that contributes to society they way in which our profession does. Thus it is incumbent on us to find a solution to the problem of under funded pensions and compensation in general.

@Doug Carroll,
Thank you for sharing your story! Those are some interesting ideas. I agree that one size fits all approaches aren’t ideal.
I write about Georgia’s TRS and pensions in general quite a bit, so you can check out my other commentaries if you interesting in the topic.

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